Salvatore Ferragamo’s new collection made with orange fibre shows how brands are realising they will only make an impact if they pair up with social enterprises with radical business models, says Raffaella Cagliano
Once upon a time, there was philanthropy. It wasn’t only the richest company founders – think Gates or Zuckerberg – that devolved parts of their wealth to the cause, but increasing numbers of companies were spending revenue on social enterprises. Sometimes this was through foundations that worked separately to their business, with the support of an NGO, or through a partnership with a non-profit organisation. Yet philanthropy and charity consume resources, both money and man-hours, and often operate with businesses in the short-term. These kinds of arrangements are not sustainable solutions to dealing with the big societal challenges that we face.
So where does the solution lie? Certainly not in the business-oriented investments of large companies that are trying to seem more sustainable. As is the case for traditional innovation, sustainability-oriented or social innovation is more difficult for these incumbent companies, which are often locked into investments, systems, markets and cultures that were built around capitalist, resource-consuming business models.
However, at the other end of the market, new social ventures built around radical, new, sustainable business models, are emerging. Compared to traditional ventures, which relied heavily on the support of grants or funding/donations, these new enterprises are trying to merge the economic and social value of business practices. Their aim is to make social value economically sustainable.
Yet these new social ventures, as with many small companies, are often limited by a lack of resources and find it difficult to scale up their businesses. This often limits their potentially important contribution to the overall large-scale challenges of sustainable development. Thus the paradox of truly sustainable business models: those that have the resources don’t have enough motivation, creativity or freedom to radically redesign their business models to make them sustainable, while those that are ready to do this don’t have the resources to scale-up.
It is no surprise, then, that we are seeing a growing trend of large companies partnering with social ventures to increase the impact of their CSR.
The EurOMA Sustainable Operations and Supply Chain Forum, held at the School of Management of Politecnico di Milano in February, examined some of these key issues. Representatives from Orange Fiber, a start-up founded in Sicily that creates a sustainable textile from citrus juice by-products, were present. The company is truly sustainable; its business model is based on the reuse of waste that would otherwise pollute the environment, transport costs are reduced by the close proximity of its production plants, and the product is an eco-compatible, fully disposable fabric that could replace the petrol-based alternatives currently used in the industry.
The success of this venture may not have been possible without the investment of some well-known Italian luxury brands, including Salvatore Ferragamo, which has launched an Orange Fiber collection. Without the partnership of these organisations it would not have enough resources to move from the prototype to an industrialised process. Current materials, which are harmful to the environment, would have had no competition.
On the other hand, these big brands would not have the freedom, creativity and competency to develop such innovative new technology. The partnership serves the dual purpose of scaling up a very promising sustainable innovation and, at the same time, developing a sustainable product line for established and more conservative fashion brands.
Another example of a sustainable business partnering with bigger organisations is QUID. QUID is an ethical-fashion start-up that promotes the employment of disadvantaged women. Additionally, its products are made with surplus and scrapped fabrics from bigger fashion partners, among them the best “Made in Italy” brands. QUID collections are limited-edition, with innovative designers creatively adapting each product to suit the current supply of raw materials.
Besides having its own retail channels, QUID is also partnering with some well-known fashion and apparel brands, such as Calzedonia, Tezenis, Intimissimi, DeN and others to support its sustainability strategy. These companies supply scraps from their production processes to QUID, which in turn produces a sustainable product line for them. This is, once more, a partnership that allows QUID to grow and self-sustain economically while increasing the sustainability and brand reputation of its larger partners.
These companies operate within the same industry, but the scope of these arrangements is visible in industries from food to furniture. These partnerships are creating a new dawn of ethical collaboration, one that is likely to grow and develop as these business relationships become more common. The basic concept of these enterprises is summarised by Muhammad Yunus, an acclaimed social entrepreneur: “A charity dollar has one life; a social business dollar has endless lives.”
Raffaella Cagliano is a professor of people management and organisation and deputy director of faculty management at Politecnico di Milano School of Management. @MIP_PoliMi.